Will Laying Off Govt Employees Put America Back to Work?

“House Republican Leader says lawmakers should fix the budget mess sooner rather than later,” says the headline of the press release sent to me yesterday by the Republican Party. The press release, in which the state’s House Minority Leader Richard DeBolt (R-Chehalis) calls for a special session of the legislature to make cuts instead of allowing the Governor to do so, brought back memories.

I was covering a conservative, anti-tax rally on the Capitol Steps in Olympia on President’s Day for the Olympia Newswire, standing next to the speakers’ tent beside the podium in order to avoid the blare of the too-loud speakers directed at the 2000+ attendees. Amber Gunn, Policy Director for the Evergreen Freedom Foundation, a conservative think tank that sponsored the tea-party-like rally, told the crowd that “Government can’t create anything. Real wealth creation only happens in the private sector.”

Gunn then went on to list a series of proposals for addressing the state’s $2.8 billion budget shortfall without tax increases. This included getting the state out of the following businesses altogether: tourism promotion, liquor sales, parks and public lands administration, and arts and culture funding. She also called for the implementation of State Auditor Brian Sonntag’s recommendations for increasing government efficiency. But Gunn saved her biggest proposals for last: subcontract government services out to private industry whenever possible, freeze the salaries of remaining government employees and reduce their health care benefits.

As Gunn read through her policy proposals, I observed Richard DeBolt confess to a colleague that “we don’t get to say these things.”

But in so many words, they do. Most Republicans and not a few politicians in the so-called “Roadkill” caucus of middle-of-the-road Democrats in the Washington state legislature talk openly about government spending as if it were something that only inhibits economic growth. They talk about government employees as people who are always fundamentally inferior to private sector workers, and therefore inefficient. And they oppose raising taxes because they assume that, in the end, whatever contribution government makes to the economy is always offset by the negative effect it has by raising taxes to pay for its spending.

The truth is much more complicated. Government spending creates more jobs in Washington state than any other single industry. In 2008, 18.5 percent of all jobs in Washington state, or 546,300 jobs, were government jobs (federal–including military–, state, and local). State government alone employs more Washington residents than Boeing and Microsoft combined– about 150,000 people, or 5 percent of Washington state’s total workforce. And this doesn’t even take into account the tens if not hundreds of thousands of jobs in Washington’s private sector that are heavily dependent upon government contracts or government employee consumer spending.

Despite these facts, most anti-tax activists and not a few moderates do not consider government spending to be part of the “real” economy.

Just a generation ago, Gunn’s list of budget cutting priorities would have been seen as extreme. And the notion that government spending has no positive effect upon the economy would have been dismissed as ignorant of both 20th century history and mainstream economics.

But the landscape changed after the Republican “revolution” of the 1994, when mid-term elections brought a wave of activist anti-government Republican legislators into public office across the country, with Newt Gingrich serving as its public face in Congress. Locally, this anti-tax movement (with Tim Eyman serving as its de facto spokesperson) has overwhelmed and almost driven to extinction the Dan Evans-style moderates who used to dominate Washington’s Republican Party by promoting good government instead of no government.

Fifteen years later, calls to privatize many government functions and downsize the rest are now mainstream inside the state’s Republican Party. Indeed, they have only increased as part of an emerging right-wing agenda for responding to the growing budget crisis in Olympia.

According to anti-tax ideologues, the only way to create jobs during a recession is for the government to fire people, and to make those remaining government employees do more for less money. In this view, government, rather than playing an essential, if still secondary, role in the economy, is a parasite on “real” wealth creation. Taxes– rather than preventing the economy from overheating in booms or stimulating consumer spending during busts–do nothing but inhibit capitalism’s process of creative destruction.

So what is government for? There has been some good reporting on the question of whether the state Republican Party’s dissent against increasing taxes makes it anything more than “the party of No,” as state Senator Adam Kline (D-Seattle) dismissively described them to me. The Olympian reported in February that “the minority party is refusing to show exactly how it could get to a budget balanced without new revenue.” NPR reporter Austin Jenkins followed up on the Olympian’s story for Crosscut.com with an attempt to “discern some shadowy outlines of the GOP approach.” He found some Republicans willing to talk openly about cutting health care for the uninsured and income supports for those with mental and physical disabilities that make them unable to work. But even then, talk of “values” and the wonders of the free market trumped specifics about how cutting thousands of public employee jobs was going to get us out of the Great Recession.

When Kirby Wilbur of the right-wing, anti-tax group Americans For Prosperity followed Amber Gunn a couple speakers later at the President’s Day rally, he asked the crowd what kind of economics raises taxes in a recession to stimulate the economy, since taxes are an extra hardship in tough times. “That’s stupid-nomics!,” Kirby boomed, answering his own question.

Actually, it’s called counter-cyclical economics. It’s a Keynsian economic theory that dominated public policy in this country from the 1940s through the early 1970s, and oversaw the greatest expansion of the middle class in United States history. Has anyone in Olympia heard of it?

Counter-cyclical economics helped explain why balanced budgets, low taxes, and low interest rates could not end the Great Depression. When unemployment reached 20-30 percent, consumer spending dropped through the floor. Those with wealth did not want to invest in businesses that would produce goods that most people had no money to afford. Taxing wealthy individuals enabled the government to circulate money that otherwise would have been hoarded, to get it into the hands of people who would spend it, and to allow that spending to drive the creation of new businesses. It didn’t end the Depression– only wartime government spending was large enough to do that. But it did reduce unemployment, and provided a blueprint for the post-war expansion of the middle class after World War II.

Nearly seven decades later, most of those lessons have been lost. Anti-tax, anti-government ideology reminiscent of Herbert Hoover reigns supreme even as unemployment hovers around 10 percent (and real unemployment is probably closer to 20 percent). It dominates public policy debates because the Democratic Party, the Party of FDR, because it pays it so much deference. In fairness, Democratic Party deference to anti-tax politics is less ideological than it is pragmatic, conditioned by more than a decade of success of anti-tax initiatives at the polls. The state’s Democratic Party leadership was traumatized by the 1994 Republican revolution followed by years of Tim Eyman’s anti-tax initiatives, leaving them shell shocked and defensive even when they have a super-majority.

Washington state is hardly unique in this regard. Nationally, while private sector employment is showing modest gains, much of it is being offset by the growing unemployment of public sector workers overseen by Democrat-controlled state and local governments. The memory of the New Deal has faded, and the party of FDR is struggling under the weight of blue dogs who, scared of raising taxes on the wealthy, trick themselves into believing that deep cuts to government services will somehow put America back to work.